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How to Pre-qualify for a Mortgage

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By : Flynna Jones    99 or more times read
If you are buying a house or any other real estate, the conventional way of doing it is, to secure a loan from a bank or any financing institution to help you put up the whole amount of the selling price of the house; this is assuming that you do not have the capacity to pay the whole price in cash.

There are many banks and lending institutions that are willing to help you in this matter; provided you qualify with their criteria. This method of buying is through the real estate mortgage loan. Meaning, you will buy the house with the help of a financial institution, i.e. a bank or any lending institution, by borrowing the money from them. They will buy the house for you (the loan), and you will pay them on monthly amortizations for a specific period of time (the term), with a specific amount to be added, to the principal amount,(the interest).

Since these institutions are in the business of lending money for interestís sake, naturally they will protect their investments by requiring a form of security from you. and this security will be the house that you are buying. You will have to pledge the house to them (the mortgage), until you have paid the entire amount of the loan. In case of default of payment on your part they will have the right to foreclose your house and sell it to another party; this is to recover their investment made on you.

To secure a mortgage loan from these institutions, one must apply for a loan. When applying for a mortgage loan one must have to undergo some process which they call the prequalification and pre-approval processes. The mortgage pre-qualification step is a relatively simple one, but it is an important one. It begins the process of formally applying for a mortgage, and it gives everyone involved--especially you--a clear sense of the direction they should be headed. By knowing what your financial parameters are, they can look for the right house for you that fit your financial capabilities. Obviously in this case, the final decision of what kind of a house you can buy is theirs, not yours. But of course you have a choice. Once you have determined the amount that you are qualified to borrow then you can start looking for the kind of house that suits your taste, but within the approved budget. So, before you start looking for a house to buy, get pre-qualified and pre-approved first.

Keep in mind that the amount of mortgage you will qualify for is the maximum. It is the amount that the lender deems you can afford, but it is not necessarily the amount that you want to pay. It sometimes is helpful to be conservative in this matter. For example, if you qualify for a $100,000 mortgage and you have $15,000 available in cash for down payment and closing costs, you are qualified to buy homes with a maximum selling price of $115,000. But do not push yourself to the limit; look at homes that sell in the $100,000 to $110,000 range. Oftentimes many buyers simply rush off to the $115,000 level and find themselves strapped when the time comes to purchase necessary items (such as draperies, additional furniture and lawn and garden tools, or when they forget to provide for increases in monthly expenses (for example utilities and maintenance and repair costs).

It always pays to be prudent in big matters such as buying a house through mortgage. Get pre-qualified and pre-approved!

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